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easy2012

Factors Affecting House Price

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The old Andrew Farlow (Oxford University) Research Paper

http://www.economics.ox.ac.uk/members/andrew.farlow/Part1UKHousing.pdf

(page 5, 2.1) says that:

Real Interest Rates -0.02 to -0.04 [1% decrease in real interest rate will give rise to 2-4% HPI.]

Income 1.7 to 3.0 [1% increase in income give rise to 1.7 - 3% house price increase]

Households 2.0 to 3.0 [1% increase in household leads to 2-3% increase in house price]

Housing Stock -2.0 to -3.0 [1% increase in housing stock lead to 2-3% decrease in house price]

Interesting to see how these various factors will play out. It would reckon the falling availability of income to be used to be spent

on housing will be the dominant factor.

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"[1% increase in housing stock lead to 2-3% decrease in house price]"

I've heard this said before, so since January we have seen around a 40% increase in stock according to rightmove (it's much higher according to my data) so are we now going to see an 80-120% decrease in prices!??

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The old Andrew Farlow (Oxford University) Research Paper

http://www.economics.ox.ac.uk/members/andrew.farlow/Part1UKHousing.pdf

(page 5, 2.1) says that:

Real Interest Rates -0.02 to -0.04 [1% decrease in real interest rate will give rise to 2-4% HPI.]

Income 1.7 to 3.0 [1% increase in income give rise to 1.7 - 3% house price increase]

Households 2.0 to 3.0 [1% increase in household leads to 2-3% increase in house price]

Housing Stock -2.0 to -3.0 [1% increase in housing stock lead to 2-3% decrease in house price]

Interesting to see how these various factors will play out. It would reckon the falling availability of income to be used to be spent

on housing will be the dominant factor.

Ultra low interest rates look set for the forseeable future, so the most important determinant of house prices will be forced sellers due to unemployment. If that happens then we'll see big falls in nominal house prices (over 20%), if it doesn't happen then house prices will still correct downwards, but it'll be a long drawn-out process of attrition where most of the reduction is in "real" prices, in other words inflation will erode away "real" house prices, but nominal prices won't fall more than 10%.

Let's see.

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[1% decrease in real interest rate will give rise to 2-4% HPI.]

So dropping them from 5% to 0.5% will inflate them by what, 15% ?

So what does that tell us how the now-flat market would be without the rate drop ?

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"[1% increase in housing stock lead to 2-3% decrease in house price]"

I've heard this said before, so since January we have seen around a 40% increase in stock according to rightmove (it's much higher according to my data) so are we now going to see an 80-120% decrease in prices!??

I guess it means total housing stock rather than houses currently for sale.

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  • 140 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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